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The Evolution of MCNs and Rise of Digital-First Studios

In 2012, the first wave of investments into multichannel networks (MCNs) began with Discovery’s $30 million acquisition of Revision3. By 2014, the media and advertising industry spotlight was shining on MCNs, who were reaching the millions of viewers that were increasingly spending less time on traditional TV. Since the wave of investments that year (most notably Disney’s $500 million+ acquisition of Maker, Otter Media’s acquisition of Fullscreen and RTL’s $107 million acquisition of StyleHaul), MCNs have evolved from YouTube channel aggregators to digital-first studios and multi-platform media companies. They expanded their footprints across niches, geographies and formats, and diversified their revenue streams to include talent management, advertising, branded content, subscriptions and licensing.

Representative developments include StyleHaul’s launch of a new male lifestyle video destination Hauk, and AwesomenessTV’s new vertical, Awesomeness Music. Tastemade plans to expand its global footprint by creating localized channels in ten international markets.

MCNs have also expanded into film. AwesomenessTV and Fullscreen both have released films and have announced new ones in production. Studio71 (owned by Germany’s ProSiebenSat.1) inked a distribution deal with Paramount for many of its films.

MCNs continue to collaborate with traditional media giants, bringing in viewership and fresh content while the media giants bring the infrastructure and big-brand dollars. Whistle Sports and the NFL established a content partnership in which they would co-produce a variety of video formats across social platforms. Maker Studios has been folded into Disney’s Consumer Products and Interactive Media (DCPI) division, which is in charge of creating short-form content on digital platforms.

Across all initiatives, the most critical shift in the MCN model is the increased focus in producing and owning IP, which creates new monetization opportunities. Fullscreen launched its $4.99-per-month SVOD service—fullscreen—last April featuring a mix of originals, social media and licensed content. AwesomenessTV, in partnership with Verizon, also announced plans to launch a new content venture.

During the same period of the MCN evolution, dozens of new ventures positioned as digital-first or multiplatform studios were launched (New Form Digital, Gunpowder and Sky/Supergravity, Legion of Creatives, and Canvas Media—to name a few). In addition to these, digital publishers such as Woven and Buzzfeed, have turned up their video operations to hypermode. These new digital studios co-exist with MCNs in creating short-form and long-form content, some leveraging digital influencers, that can be consumed on all channels, especially social and mobile.

Many forces drove the evolution of MCNs and the rise of digital-first studios. First, social media platforms made video central to their growth strategies. The viewers followed and increasingly spent more of their video viewing time across social media platforms. Mobile viewers now watch videos on Facebook as much as they do on YouTube and Snapchat is not far behind, eMarketer reports. Facebook launched its livestreaming feature and Instagram Stories, and recently announced testing midroll ads. Tastemade and Mitu both have dedicated channels on Snapchat Discover. These video-centric developments provide content creators (and advertisers) with more options to reach and engage viewers and monetize their content.

The influencer channel aggregation model has also been challenged with the rise of marketing platforms and agencies who facilitate brand-influencer connections. Without exclusivities and other contractual flags, these make attractive options for many individual creators dissatisfied with MCN relationships. Marketers have also opted to go do directly to influencers, bypassing the MCNs. In response, MCNs have continue to beef up their value proposition to marketers with new services and expansion into coveted, niche demos.

Finally, the launch of dozens of OTT video services in the last few years and the competition among existing services created an increase in demand for content. Verizon’s go90 and Comcast Watchables together have made content deals with almost all major MCNs and digital-first studios. In a previous newsletter, we attempted to capture the drastic change in the number of services made available in recent years. Hungry for quality content, many were paying creators cable-standard licensing fees. Although this has undoubtedly promoted growth of the video ecosystem, acquiring and retaining viewers (and sustaining the level of content acquisition) will continue to be a challenge for these services due to the myriad options available.

These digital-first media companies are far along in the direction of developing and monetizing their own IP, not unlike established media companies. However, the advantages this new breed of media companies has, and the reasons driving acquisitions and partnerships, are their direct relationships with consumers, existing relationships with influencers of significant reach, and access to audience data and insights.